“The thinking is if you’re going to rent a movie from YouTube, you’re not going to rent from a Blockbuster store or Netflix,” said Edward Woo, an analyst at Wedbush Morgan Securities.

Woo said that a deal would likely hurt Netflix more, since the subscription-based company has a much deeper digital streaming service.

Woo considered the overall impact to both companies minimal, adding, “I think people are overestimating the success that YouTube will have.”

Janney Montgomery Scott analyst Tony Wible rated Netflix a “sell” with a $34 price target on Thursday, saying the market has failed to price in competition from YouTube and rental kiosks deployed by Blockbuster and Redbox, as well as competition from a Google Inc (GOOG.O) movie rental service.

According to a person familiar with the talks, YouTube has held discussions with Lions Gate Entertainment Corp LGF.N, Sony Pictures, a unit of Sony Corp (6758.T), and Time Warner Inc’s (TWX.N) Warner Brothers about online movie rentals.

It would mark the first time the world’s most popular video site would charge users to watch videos.

Woo said Blockbuster’s stock is also retreating from a recent run-up.

Shares of Blockbuster jumped more than 37 percent on Wednesday after the company cut the size of its letters of credit for Viacom Inc VIAb.N by about two-thirds, or $50 million, a move that analysts said signals an improving credit outlook. The company also recently announced the sale of entertainment retailer Xtra-vision Limited in Ireland.